Monday, September 08, 2014

We’re Not Guests, We’re Customers

SARATOGA SPRINGS, NY, September 8, 2014--I’m a Bill Shanklin fan and have been for some time. A creative Lexington-based marketer, some of the more inventive ideas I have encountered in this business seems to have originated with him.

This time, however, I think he missed the mark. Oh, he’s correct when he posits that racing needs to cultivate the horseplayer but, if takeout is the issue, his focus is on the wrong type of player.

His idea of the ideal target, the whale, has no incentive to see takeout lowered since the high rates in place ultimately fuel his rebates.

If takeouts were lowered across the board, increased participation would affect the nigh-volume bettor in a more meaningful way because “square money” would be back in play.

Fresh betting capital would allow the deep-pocketed player to make up for smaller rebates because his expertise and bankroll leverage could buy more big-payout pools, especially fueled by carryovers.

Lower takeout, in addition to keeping active players liquid longer, would give way to marketing campaigns that attract new bettors who don’t mind mixing a little intellect with their action.

But until the current customer base is maintained and new ones are created, added liquidity won’t happen, and whales will begin to cannibalize each other, a process already underway.

As this trend continues and grows, when the whale’s perceived edge becomes smaller and smaller, they’ll move on to the next big gambling scheme.

In his most recent piece, Shanklin discussed the nuance of language and how that language affects marketing strategy. And there’s one new PR buzzword that insults my intelligence as it should yours. That word is “guest.”

I’m almost certain the term guest was first used at the “old Meadowlands,” but in this era the phenomenon has spread everywhere throughout the industry so that many marketing campaigns are built around the nuanced term.

Empirically, no intelligent individuals are buying into the message.

A “guest” often enters familiar premises by bringing a bottle of wine or a box of expensive cookies to express appreciation to the host for his invitation and hospitality.

But the guest doesn’t enter this domicile with an almost-certain expectation that he will leave with less money in his pocket than when he entered.

The racing industry is in the gambling/entertainment business. Horse races are the show, and are there many places on the planet that provide such Grade 1 people watching? When there are people in the building, the electricity is palpable, the place exciting.

For this experience, fans/bettors are charged a fee to participate; parking, admission, and a scorecard to differentiate one player from another notwithstanding. Further, for every five betting dollars spent, one goes for taxes.

This is what happens to customers, not guests. Of course, there is also some expectation that fans could leave the building with more betting money than when they arrived.

However, when I win I’m taking your money; when you win you’re taking mine. That always happens in games of chance; somebody wins, somebody loses. Either way, it’s betting money, not guest money that fuels the process and gives life to an industry.

But those dollars don’t go to those who actually put on the show; they only share proceeds from the winners and losers. But the house--at least 99 and 44/100s percent of the time—always wins.

So it’s the betting customer, not a guest, who provides the revenue needed to make all the mares go.

And choosing from this population of occasional and inveterate bettors, even casual fans who might watch horse races four times a year, bet sometime. They need to bet more of the time—and have their friends do the same.

It’s the player who bets his money regularly--whether he is a weekend or event warrior, or the daily online player sitting on a couch--who is racing’s MVP.

The use of nuanced language is indicative of how racetrack executives regard fans and market their wares. This calls for a hook. Television does that with pretty pictures and myriad human interest stories about the human and equine practitioners.

But after yet another month of downward economic indicators, and with fewer “guests” on the horizon in the coming months, rank-and-file bettors are the group that badly needs targeting and not the handful of large-volume players, whatever their considerable contribution to the betting pie.

As the handicapping/betting process continues to be more data driven, and players become more sophisticated, winning will become more difficult than it already is—and that’s plenty difficult.

When only “experts” remain, they eventually will take their algorithms and move on to the next big pasture lined with green. For them, money is not the prime motivator, it’s the only motivator.

What needs growing is the pie, that pool of rank-and-file weekend warriors and online bettors. And no one will become part of this fabric until they’re first introduced to a racetrack and treated like the valued consumers they are.

These customers pay for the privilege of walking into a wagering space with all its ancillary expenses. The industry needs to provide them with a clean, comfortable facility and not be price-gouge them for ordinary--or even good—fare and services.

Like bettors, today’s customers want value. Don’t welcome them, or newbies, into your house by tell how much their status as guests are appreciated. As long as they are, like me, spending and betting their money, they’re patrons, not guests.

Don’t tell us; show us you appreciate our spending discretionary income and betting dollars at your facility and you can do that by creating more of us.

Now that would be an “experience” worth “sharing.”

Written by John Pricci

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Thursday, August 14, 2014

A Sport in Conflict with Itself: Policing vs Promoting

SARATOGA SPRINGS, NY, August 13, 2014--The approach that can help insure racing’s survival might have been outlined two years ago when Travis Tygart, the CEO and Counsel to the United States Anti-Doping Agency, was invited to speak at the annual Jockey Club Round Table conference here.

That day Tygart’s message reached many of the industry’s most influential stakeholders and, intertwined with Senate investigations into a spate of equine injuries and fatalities, the idea of federal regulation was introduced.

What everybody thought they knew then, and still believes, is that federal legislation can’t work because individual states control racing’s rules and regulations and there’s no realistic chance that the status quo would ever change.

Horsemen’s groups cite the progress being made on the medication front. Matters like these take time, they say. The issue is highly charged and has become political as proponents and opponents have dug in their heels.

And the wheels of politics grind very slowly, if and when they grind at all.

So now it is two years later, reform hasn’t come, and neither has significant progress been made unless you believe that having nine of 38 states implement a two-tier drug classification is a big step forward, or that 12 of those 38 have state veterinarians dispensing raceday Lasix.

And what is one to make of the fact that only six of the 38 have adopted new penalty guidelines for multiple medication violators, or that a mere five—and this excludes New York, California, Kentucky and Florida—have adopted all phases of the National Uniform Medication Program?

This Sunday, Jockey Club chairman Ogden Mills Phipps reiterated what everybody knows should be done but won’t because of economics and expediency:

“Our horsemen and our customers all deserve a level playing field with uniform rules and clean competition,” Phipps said. “We need the National Uniform Medication Program to be implemented in every racing state and we need uniformity of rules and greatly improved lab standards.

“We need a penalty structure that is strong enough to be a meaningful deterrent — not one that would allow a trainer to amass literally dozens of violations over the course of his career and continue training. And we need to eliminate the use of all drugs on race day.”

At the National Museum of Racing the following morning, Tygart returned to Saratoga for an informational meeting as a guest of the Water, Hay, Oats Alliance, WHOA, a grassroots organization of prominent owner-breeders.

The gathering wanted to hear what Tygart had to say and were looking for guidance as how to best implement a strategy that would keep horseracing viable as a sport and an industry going forward.

Tygart said that USADA could assist the racing industry if all factions would push for federal legislation authorizing the agency to handle equine drug testing and enforcement--based on guidelines the industry would provide.

“We’re here for the right reasons or we wouldn’t be here otherwise,” Tygart said. “We’re not here to promote the sport or grow revenue for it. We’re here to protect the rights of the participants.

“Our interest is in a clean sport. Yesterday was a big moment and racing should be proud of what the Jockey Club has done [in requesting enabling federal legislation]. I’m honored to be here to help. The vision of USADA is as guardian of the life values learned through true sport.”

Part of the opponent’s disinformation campaign is that USADA involvement equates to a federal takeover. “When USADA was founded in October, 2000, the best thing we did was to hand off the testing to independent organizations,” said Tygart. “That’s how the Olympics dealt with their drug issues in the late 1990s.”

“There are three components to uniformity, independent policies and enforcement: Enabling legislation authorizing USADA to handle equine drug testing and enforcement; funding, because you can’t afford not to if you want to grow the pie, and the model--what does the process look like?”

In 1999, USADA had evidence that cyclist Lance Armstrong was using an EPO gel but had no test for the substance. Five years later a test was developed. They analyzed a frozen sample and concluded that the EPO levels found in Armstrong did not happen naturally.

“There were gross variations of blood values,” he explained. “The chances were 100 percent that these changes did not happen naturally and that the EPO was entirely synthetic.”

The Agency was instrumental in the Balco case, too, which Tygart also prosecuted. Ultimately, Tony Bosch’s admitted on “60 Minutes” that if tests hadn’t proved ball players were using Human Growth Hormone, his company would still be distributing it.

Alex Rodriguez was among the players caught when testers enhanced the HGH detection process. “HGH was difficult to detect. There was only a 72-hour window or users would test negative. Later, a new test had a 21-day window.”

That’s why out-of-competition testing is so important as a deterrent. “Whistle blowers play an important role,’ Tygart said, “and that’s why independence is so important.” If there is no accountability, [competitors] will join the cheaters. That’s just the way it is.”

“The problem could be solved quickly. The lack of out-of-competition testing is a big problem. Under USADA 67% of the tests was out-of-competition. In racing, it’s less than one percent.” This technique has been instrumental in detecting HGH, insulin growth factors, EPO and derivatives thereof, steroid cycling therapy, and Testosterone.

Athletes won’t go to their sport’s regulators to complain for fear of recrimination. Cyclist David Zabriskie was the whistle blower that helped take down Armstrong, telling USADA his coaches told him that “if you don’t use these drugs you won’t be allowed to compete.

“In cycling, athletes who didn’t cheat made it happen. It’s a difficult talk [to have],” Tygart admitted. “Following appearances on television after the PETA video, I got a number of e-mails from potential whistle blowers.” Tygart would not specify how many.

With USADA’s oversight, five athletes failed to make the 2012 Olympic team because performance enhancers were detected. “What’s the point of winning a medal that you’d have to give back later?”

Tygart is willing to help horse racing because he has grown to love the sport. He is not quick to say yes to any request made by a sports league. The NFL came to the Agency in the early 2000s for help with its drug culture issues, a problem analogous to racing’s.

USADA advised the NFL that their athletes should not be allowed to use medication on game day. When the league refused, the Agency walked away. “We can’t help a sport that doesn’t want to clean itself up.” Tygart believes there should be no medications, including Lasix, allowed on raceday.

If USADA had the authority to perform equine drug testing, it would develop rules with industry input, not make them unilaterally. Said Tygart: "Legislation obviously is the best route because it [would allow] for a top-down approach.”

Written by John Pricci

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Tuesday, July 15, 2014

L’Affaire Martin: Del Mar Wants It Both Ways

SARATOGA SPRINGS, July 15, 2014—This time, it was the other, silent member of “Dumb Ass Partners,” Perry Martin, who jumped ugly on the subject of dual Classics winner and 2014 Horse of the Year co-favorite, California Chrome.

Yes, this is the same man that blew off the Preakness in a fit of Derby pique and who recently raked Del Mar over the coals for having the temerity to suggest that “America’s Horse” be honored with a parade between races on Pacific Classic day.

The story has been told in different precincts and in disparate versions and there seems to be enough “blame” to go around about a much-ado-about-very-little incident that became front page racing news because Kentucky Derby winners always are.

And that’s especially true this time when the Derby-Preakness winner’s story didn’t end on the sand and loam of Belmont Park but rather on the front page of national and network media after Steve Coburn’s meltdown following Chrome’s crushing Triple Crown defeat.

Finally, with his wife at his side like some politician who got his business caught in some cookie’s jar, Coburn, after doubling down on his post-Belmont rant the following day, made a humbling, tearful apology before a network audience the day after that. It was a case of all's well that ends.

If anything, Coburn’s knee jerk tirade and Martin’s insensitivity indicates that it just might be harder for connections of any good horse to hold their best form for over two months than it is for their equine athletes. Clearly, it was time for a badly needed freshening.

But perspective is needed elsewhere, too, with some regard given for the fact that this was team of big-race neophytes that had been jumping through media hoops since a Santa Anita Derby tour de force made California Chrome a solid Kentucky Derby favorite.

There’s no need to rush to judgment in 44-flat. It’s one thing to say that if you’re “lucky” enough to win America’s most cherished prize, you should give back in every situation, at every opportunity, magnanimously, as if reality actually works that way.

The truth is that one knows for certain how they would react to new, bigger-than-life experiences until they experience events in the moment.

So whether Del Mar leaked a California Chrome appearance to media, hoping to embarrass DAP Racing into an unscheduled, unwanted appearance on the track’s biggest day, or whether Art Sherman said OK prematurely, is speculative and beside the point.

Or whether, after being shunned, Del Mar let it slip that greedy owners demanded a $50,000 appearance fee after failing to make a counter-offer, to cover expenses at minimum, demands that readers of Perry’s press release take him at his word.

Either way, Martin did not cover himself in glory. To say that local mainstream media are in Del Mar’s pocket without evidence is the cheapest of cheap shots, libelous, or both, and the appearance fee on its face seems excessive.

In our view, the more damaging element coming from this is DAP Partners running in a race created by Los Alamitos as an alternative to the “win and you’re in” Awesome Again Stakes if first it agreed to pay Chrome’s supplemental fee into the Classic.

So, first, the track lines up a gateful of equine tomato cans for Chrome to crush then pays California Chrome’s way into the big dance. This is, of course, outrageous thinking. Back East, this is called chutzpah. Out West, the proper term would be huavos or, if one prefers, cojones.

From a distance, DAP rightfully should expect that Del Mar pay for vanning expenses and give what racetrackers call a ‘stake’ to the colt’s stable hands and exercise rider, and maybe a little walking around money for the owners and trainer.

Del Mar has a vested economic interest in Chrome’s appearance but left nothing on the table for those who would bring customers into the building. Not to conclude there is a modicum of risk, and then to expect owners to foot the bill is equally offensive.

The pushback from certain industry types and favor-currying racing media was more predictable than Untapable’s win in the Mother Goose.

The California Chrome story was and is a real life fairytale. To strongly suggest that owners in the game for a proverbial 15 minutes owe the industry at debt is as nervy as asking Los Al to pay Chrome’s Breeders’ Cup entry fee.

Playing a significant role in this game IS a privilege, but the business has claims on no one. This isn’t a retired race horse at the end of a storied career; this is an active equine meteor that at any time can fall to earth if the racing gods deem it so.

It is true that this horse has earned $3.3 million. Considering huge tax obligations and expenses associated with playing the game at its highest level; travel expenses, per diems, feed and vet bills, the standard 10% to Sherman and Victor Espinoza, what remains is a pretty healthy 401K. But it doesn’t punch your ticket to Easy Street for life.

To be called out by a celebrity owner who came into racing with a seven or eight-figure cushion is cheeky and condescending, but even he admitted he would have had a “quiet conversation” with track ownership for this privilege of being “honored.”

And to add that the Dumb Ass Partners “are making us look bad” is really pompous. I can think of one or two issues that embarrass horse racing on a daily basis; institutionalized stupidity and greed being far worse than a couple of neophytes playing the fool.

Del Mar’s hiding behind the “not for profit” banner is disingenuous. The 50K that Martin wants would a deductible cost of maybe putting 5,000 or so added fannies in seats.

There’s something else at work here. Industry practitioners are paid appearance fees all the time. Back in the day, when the Haskell struggled for Travers-like prestige, Monmouth Park paid trainers under the table to run “the big horse” at the shore.

Of course, the Haskell is now a million-dollar Grade 1, but tracks still pay to bring equine stars to their venues. And big time jockeys are paid appearance fees, too, akin to a non-refundable purse advance. If you want a Hall of Famer to ride your horse, it helps to pay up front, especially for a non-favorite in a big spot.

At a critical time for a potential Horse of the Year champion, scheduling with regard to morning workouts, shipping, spacing, etc., parading in a charged atmosphere before a huge crowd is not without a certain amount of downside. The only gain is Del Mar’s, which apparently wants something for nothing.

Martin’s asking price and other suppositions are somewhat embarrassing, even bordering on the boorish. But if the track truly wants to honor the home state hero, perhaps Del Mar and DAP’s critics should admit that the track owes something, too.

Del Mar has been around a long time. There’s no guarantee that California Chrome even will be around long to compete in the 2017* Classic, where the surf will meet the championship turf for the first time in history.

Written by John Pricci

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